Urban Edge Properties Reports Third Quarter 2015 Operating Results

NEW YORK--(BUSINESS WIRE)--Urban Edge Properties (NYSE:UE) announced today its financial results
for the three and nine months ended September 30, 2015.

Third Quarter 2015 Highlights:

Generated Recurring Funds from Operations of $0.30 per diluted share
for the quarter, and $0.90 per diluted share for the nine months ended
September 30, 2015

Generated Funds from Operations ("FFO") of $0.32 per diluted share for
the quarter and $0.63 per diluted share for the nine months ended
September 30, 2015. FFO for the three months ended September 30, 2015
includes $0.02 per diluted share of tenant bankruptcy settlement
income. FFO for the nine months ended September 30, 2015 includes
$0.28 per diluted share in transaction costs and one-time equity
awards associated with our spin-off from Vornado Realty Trust, offset
by $0.01 per diluted share from other items

Increased same-property Net Operating Income (“NOI”) by 4.1% (3.1%
including properties in redevelopment) as compared to the third
quarter of 2014, and by 3.6% (3.5% including properties in
redevelopment) for the nine months ended September 30, 2015 as
compared to the same period in 2014

Increased same-property retail portfolio occupancy 80 basis points to
96.6% as compared to September 30, 2014 which was unchanged as
compared to June 30, 2015

Consolidated retail portfolio occupancy increased 70 basis points to
96.1% as compared to September 30, 2014 and by 10 basis points
compared to June 30, 2015

Increased active development and redevelopment projects by $26.2
million to $105.7 million due to the addition of new projects at
Garfield, NJ and Walnut Creek, CA

Shadow development and redevelopment pipeline consists of
approximately $175.0 million of additional projects to be completed
over the next several years

Ended the quarter with $197.3 million cash and cash equivalents and no
amounts drawn on the $500.0 million revolving credit facility

Financial Highlights:

Recurring FFO was $31.9 million, or $0.30 per diluted share, for the
third quarter of 2015. Recurring FFO was $95.2 million, or $0.90 per
diluted share, for the nine months ended September 30, 2015.

FFO was $33.5 million, or $0.32 per diluted share, for the third quarter
of 2015 which includes $1.8 million of tenant bankruptcy settlement
income and $0.2 million of nonrecurring transaction costs. FFO was $66.3
million, or $0.63 per diluted share, for the nine months ended
September 30, 2015. FFO for the nine months ended September 30, 2015
includes $29.6 million of non-recurring transaction costs and one-time
equity awards primarily associated with our spin-off from Vornado Realty
Trust, $1.4 million of environmental remediation costs, and $1.0 million
of debt restructuring costs, partially offset by $3.1 million of tenant
bankruptcy settlement income.

Net income attributable to common shareholders was $18.9 million, or
$0.19 per diluted share, for the quarter ended September 30, 2015, and
$23.6 million, or $0.24 per diluted share, for the nine months ended
September 30, 2015. A reconciliation of net income attributable to
common shareholders to FFO and the reconciling components of FFO to
Recurring FFO are provided in the tables accompanying this press release.

Operating Highlights:

Same-property NOI increased 4.1% for the third quarter of 2015 as
compared to the third quarter of 2014 due to higher occupancy, new rent
commencements, contractual rent increases, higher recoveries and lower
landlord expenses. Same-property NOI increased 3.6% for the nine months
ended September 30, 2015 as compared to the same period of 2014.
Same-property NOI including properties under redevelopment increased
3.1% for the third quarter of 2015 as compared to the third quarter in
2014. Same-property NOI including properties under redevelopment
increased 3.5% for the nine months ended September 30, 2015 as compared
to the same period of 2014. A reconciliation of income before income
taxes to same-property NOI is provided in the tables accompanying this
press release.

As of September 30, 2015, occupancy for the company’s consolidated
retail portfolio was 96.1%, up 70 basis points compared to September 30,
2014, and up 10 basis points compared to June 30, 2015. On a
same-property basis, retail portfolio occupancy was 96.6%, up 80 basis
points compared to September 30, 2014, and unchanged as compared to
June 30, 2015.

During the third quarter of 2015, the company executed 32 new leases,
renewals and options totaling 506,600 square feet. The vast majority of
leasing activity pertained to non same-space leases for assets in
redevelopment and new pad expansions. The company executed 9 new leases
on a non same-space basis during the quarter totaling 313,800 square
feet at an average rental rate of $9.15 per square foot, including two
warehouse leases totaling 218,400 square feet at an average rental rate
of $5.15 per square foot.

On a same-space basis, 8 new leases were executed in the third quarter
totaling 14,400 square feet at an average rental rate of $34.49 per
square foot, representing a 16.5% decrease from prior cash rents
(excluding the impact of straight-line rents). The limited number of
same-space leases executed this quarter is not expected to be indicative
of future activity. For the nine months ended September 30, 2015, 23
same-space leases were executed at an average rental rate of $27.63 per
square foot, representing a 14.7% increase from prior cash rents.

During the third quarter of 2015, the company executed 15 lease renewals
and options on a same-space basis totaling 178,400 square feet at an
average rental rate of $17.62 per square foot, representing a 4.2%
increase from prior cash rents. The total same-space leasing activity in
the third quarter (new leases, renewals and options) aggregated 192,700
square feet at an average rental rate of $18.87 per square foot, a 0.8%
increase from prior cash rents.

Development and Redevelopment Activities:

The company had approximately $105.7 million of active development and
redevelopment projects underway of which $80.1 million remains to be
funded as of September 30, 2015. Estimated unleveraged returns on these
projects are approximately 9%. Active development and redevelopment
projects increased $26.2 million during the quarter ended September 30,
2015 due to two additional projects at Garfield, NJ and Walnut Creek, CA.

The renovation of warehouses at East Hanover is ahead of schedule and
the stabilization date has been moved up from 2018 to 2017. The
conversion of Montehiedra Town Center, a 542,000 square-foot mall in
Puerto Rico, into an outlet-focused retail mall remains on schedule for
completion in late 2016. We recently executed leases with Polo and Gap.

The company continues to focus on its redevelopment pipeline, which
includes approximately $175.0 million of planned expansions and
renovations that the company expects to complete over the next several
years.

Balance Sheet Highlights:

At September 30, 2015, the company’s total market capitalization
(including debt and equity) was $3.5 billion comprised of 105.4 million
shares of common shares outstanding (on a fully diluted basis) valued at
approximately $2.3 billion and approximately $1.2 billion of debt. The
company's ratio of net debt (net of cash) to total market capitalization
was 29.8%. The company's net debt to annualized Adjusted EBITDA was 5.7x
as of September 30, 2015. At September 30, 2015, the company had
approximately $197.3 million of cash and cash equivalents on hand and
nothing drawn on its $500.0 million revolving credit facility.

Non-GAAP Financial Measures

The company believes FFO (combined with the primary GAAP presentations)
is a useful, supplemental measure of its operating performance that is a
recognized metric used extensively by the real estate industry and, in
particular REITs. The National Association of Real Estate Investment
Trusts ("NAREIT") stated in its April 2002 White Paper on FFO,
"Historical cost accounting for real estate assets implicitly assumes
that the value of real estate assets diminishes predictably over time.
Since real estate values instead have historically risen or fallen with
market conditions, many industry investors have considered presentations
of operating results for real estate companies that use historical cost
accounting to be insufficient by themselves." The company also believes
that Recurring FFO is a useful supplemental measure of its core
operating performance that facilitates comparability of historical
financial periods. FFO, as defined by NAREIT and the company, is net
income (computed in accordance with GAAP), excluding gains (or losses)
from sales of, or impairment charges related to, depreciable operating
properties, plus depreciation and amortization, and after adjustments
for unconsolidated partnerships and joint ventures. The company makes
certain adjustments to FFO, which it refers to as Recurring FFO, to
account for items it does not believe are representative of ongoing
operating results, including transaction costs associated with
acquisition and disposition activity and non-recurring revenue and
expenses. The company believes that financial analysts, investors and
stockholders are better served by the presentation of comparable period
operating results generated from its FFO and Recurring FFO measures. The
company's method of calculating FFO and Recurring FFO may be different
from methods used by other REITs and, accordingly, may not be comparable
to such other REITs.

The company uses NOI, which is a non-GAAP financial measure, internally
as a performance measure and believes NOI provides useful information to
investors regarding the company’s financial condition and results of
operations because it reflects only those income and expense items that
are incurred at the property level and when compared across periods,
reflects the impact on operations from trends in occupancy rates, rental
rates and operating costs on an unleveraged basis, providing perspective
not immediately apparent from our operating income or net income. In
this release, the company has provided NOI on a same-property basis.
Information provided on a same-property basis includes the results of
properties that were owned and operated for the entirety of the
reporting periods being compared and excludes properties that were under
development/redevelopment and properties acquired, sold, or in the
foreclosure process during the periods being compared. The company has
also provided NOI on a same-property basis adjusted to include
redevelopment properties.

Earnings before interest, tax, depreciation and amortization ("EBITDA")
and Adjusted EBITDA are supplemental, non-GAAP measures utilized in
various financial ratios. EBITDA and Adjusted EBITDA are presented to
assist investors in the evaluation of REITs and as a measure of the
company's operational performance as they exclude various items that do
not relate to or are not indicative of our operating performance.
Accordingly, the company's use of EBITDA and Adjusted EBITDA in various
ratios provides a meaningful performance measure as it relates to our
ability to meet various coverage tests for the stated period.

FFO, Recurring FFO, NOI, same-property NOI, EBITDA and Adjusted EBITDA
are presented to assist investors in analyzing the company’s operating
performance. Neither FFO nor Recurring FFO (i) represents cash flow from
operations as defined by GAAP, (ii) is indicative of cash available to
fund all cash flow needs, including the ability to make distributions,
(iii) is an alternative to cash flow as a measure of liquidity, or (iv)
should be considered as an alternative to net income (which is
determined in accordance with GAAP) for purposes of evaluating the
company’s operating performance. The company believes net income
attributable to common shareholders is the most directly comparable GAAP
financial measure to FFO and Recurring FFO while income before income
taxes is the most directly comparable GAAP financial measure to NOI and
same-property NOI and net income (loss) is the most directly comparable
GAAP financial measure to EBITDA and Adjusted EBITDA. Reconciliations of
these measures to their respective comparable GAAP measures have been
provided in the tables accompanying this press release.

ADDITIONAL INFORMATION

For a copy of the company’s supplemental disclosure package, please
access the "Investors" section of UE’s website at www.uedge.com.
Our website also includes other financial information, including our
Annual Report on Form 10-K, Form 10-Q, Current Reports on Form 8-K, and
amendments to those reports.

ABOUT URBAN EDGE

Urban Edge Properties is a real estate investment trust that owns,
operates and develops retail properties in high barrier-to-entry
markets. At September 30, 2015, the portfolio comprises 79 shopping
centers, three malls and a warehouse park adjacent to one of the
centers, and aggregates 14,831,000 square feet.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Press Release constitute
forward-looking statements as such term is defined in Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements are not
guarantees of future performance. They represent our intentions, plans,
expectations and beliefs and are subject to numerous assumptions, risks
and uncertainties. Our future results, financial condition and business
may differ materially from those expressed in these forward-looking
statements. You can find many of these statements by looking for words
such as “approximates,” “believes,” “expects,” “anticipates,”
“estimates,” “intends,” “plans,” “would,” “may” or other similar
expressions in this Press Release. Many of the factors that will
determine the outcome of these and our other forward-looking statements
are beyond our ability to control or predict; these factors include,
among others, the company's ability to complete its active development
and redevelopment projects, the company's ability to engage in the
projects in its planned expansion and redevelopment pipeline and the
company's ability to achieve the estimated unleveraged returns for such
projects. For further discussion of factors that could materially affect
the outcome of our forward-looking statements, see “Risk Factors” in
Part I, Item 1A, of our Annual Report on Form 10-K for the year ended
December 31, 2014, as amended.

For these statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. You are cautioned not to place undue
reliance on our forward-looking statements, which speak only as of the
date of this Press Release. All subsequent written and oral
forward-looking statements attributable to us or any person acting on
our behalf are expressly qualified in their entirety by the cautionary
statements contained or referred to in this section. We do not undertake
any obligation to release publicly any revisions to our forward-looking
statements to reflect events or circumstances occurring after the date
of this Press Release.

URBAN EDGE PROPERTIES

CONSOLIDATED AND COMBINED BALANCE SHEETS

(Amounts in thousands, except share and per share amounts)

September 30,

December 31,

2015

2014

ASSETS

Real estate, at cost:

Land

$

374,543

$

378,096

Buildings and improvements

1,616,769

1,632,228

Construction in progress

53,209

8,545

Furniture, fixtures and equipment

3,879

3,935

Total

2,048,400

2,022,804

Accumulated depreciation and amortization

(500,654

)

(467,503

)

Real estate, net

1,547,746

1,555,301

Cash and cash equivalents

197,338

2,600

Cash held in escrow and restricted cash

9,832

9,967

Tenant and other receivables, net of allowance for doubtful accounts
of $2,106 and $2,432, respectively

9,741

11,424

Receivable arising from the straight-lining of rents, net of
allowance for doubtful accounts of $149 and $0, respectively

Reconciliation of Net Income Attributable to Common Shareholders to
FFO and Recurring FFO

The following table reflects the reconciliation of FFO and Recurring FFO
to net income attributable to common shareholders, the most directly
comparable GAAP measure, for the three and nine months ended
September 30, 2015.

Three Months EndedSeptember 30, 2015

Nine Months EndedSeptember 30, 2015

(in thousands)

(in thousands)

Net income attributable to common shareholders

$

18,860

$

23,559

Adjustments:

Rental property depreciation and amortization

13,452

41,102

Limited partnership interests in operating partnership

1,179

1,605

Funds From Operations

33,491

66,266

Funds From Operations per diluted share(1)

0.32

0.63

Transaction costs

151

22,437

One-time equity awards related to the spin-off

—

7,143

Environmental remediation costs

—

1,379

Tenant bankruptcy settlement income

(1,774

)

(3,034

)

Debt restructuring expenses

—

1,034

Recurring Funds From Operations

$

31,868

$

95,225

Recurring Funds From Operations per diluted share(1)

$

0.30

$

0.90

Weighted average diluted shares(1)

105,436

105,351

(1)

Weighted average diluted shares used to calculate FFO per share and
Recurring FFO per share for all periods presented is higher than the
GAAP diluted weighted average shares as a result of the dilutive
impact of the 6.1 million Operating Partnership and LTIP units which
are redeemable into our common shares. These redeemable units are
not included in the diluted weighted average share count for the
periods presented for GAAP purposes because their inclusion is
anti-dilutive.

FFO and Recurring FFO are non-GAAP financial measures. The company
believes that FFO, as defined by NAREIT, is a widely used and
appropriate supplemental measure of operating performance for REITs, and
that it provides a relevant basis for comparison among REITs. The
company believes that Recurring FFO provides additional comparability
between historical financial periods. Refer to “Non-GAAP Financial
Measures” above.

Reconciliation of Income before Income Taxes to NOI and Same-Property
NOI

The following table reflects the reconciliation of NOI, same-property
NOI (with and without redevelopment) to income before income taxes, the
most directly comparable GAAP measure, for the three and nine months
ended September 30, 2015 and 2014.

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

(Amounts in thousands)

2015

2014

2015

2014

Income before income taxes

$

20,439

$

14,171

$

26,580

$

51,161

Interest income

(39

)

(9

)

(101

)

(26

)

Interest and debt expense

13,611

14,303

42,021

40,571

Operating income

34,011

28,465

68,500

91,706

Depreciation and amortization

13,603

13,148

41,568

40,444

General and administrative expense

6,385

4,606

25,503

14,275

Transaction costs

151

4,683

22,437

4,683

Subtotal

54,150

50,902

158,008

151,108

Less: non-cash rental income

(1,943

)

(2,643

)

(5,741

)

(7,325

)

Add: non-cash ground rent expense

318

442

1,015

1,176

NOI

52,525

48,701

153,282

144,959

Adjustments:

NOI related to properties being redeveloped

(3,966

)

(4,284

)

(12,171

)

(11,887

)

Tenant bankruptcy settlement and lease termination income

(1,947

)

(44

)

(3,207

)

(260

)

Environmental remediation costs

—

—

1,379

—

Management and development fee income from non-owned properties

(551

)

(133

)

(1,779

)

(398

)

Other

(181

)

(157

)

(604

)

(318

)

Subtotal adjustments

(6,645

)

(4,618

)

(16,382

)

(12,863

)

Same-property NOI

$

45,880

$

44,083

$

136,900

$

132,096

Adjustments:

NOI related to properties being redeveloped

3,966

4,284

12,171

11,887

Same-property NOI including properties in redevelopment

$

49,846

$

48,367

$

149,071

$

143,983

NOI and same-property NOI are non-GAAP financial measures. The company
believes that same-property NOI is a widely used and appropriate
supplemental measure of operating performance for comparison among
REITs. Refer to “Non-GAAP Financial Measures” above.

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

The following table reflects the reconciliation of EBITDA and Adjusted
EBITDA to net income, the most directly comparable GAAP measure, for the
three and nine months ended September 30, 2015 and 2014.